Self-Employment Tax Calculator

Self-employment tax is one of the biggest surprises for people who transition from W-2 employment to freelancing. When you work for an employer, you split Social Security and Medicare taxes 50/50. When you work for yourself, you pay both halves.

How Self-Employment Tax Works

Self-employment tax consists of Social Security tax at 12.4% and Medicare tax at 2.9%, for a combined rate of 15.3%. Only 92.35% of your net self-employment earnings are subject to SE tax. The Social Security portion is capped at $176,100 for 2025. Medicare has no cap. There is an Additional Medicare Tax of 0.9% on earnings above $200,000 for single filers.

Example Calculation

Say you earn $100,000 in net self-employment income. SE income equals $100,000 times 92.35%, which is $92,350. Social Security tax is $92,350 times 12.4%, equaling $11,451. Medicare tax is $92,350 times 2.9%, equaling $2,678. Total SE tax comes to $14,129. This is on top of your regular federal and state income taxes.

The 50% Deduction

You can deduct half of your self-employment tax when calculating your adjusted gross income. In the example above, you would deduct $7,065 from your income before calculating federal income tax. This does not reduce your SE tax itself, but it reduces the income tax you pay on top of it.

S-Corp Election and SE Tax

Some self-employed people elect S-Corp status to reduce self-employment tax. As an S-Corp, you pay yourself a reasonable salary and take the rest as distributions. Only the salary is subject to employment taxes. The IRS requires that the salary be reasonable for your role and industry. Setting it too low is a red flag for audits.

How to Reduce Your SE Tax

The most direct way to reduce self-employment tax is through legitimate business deductions. Every dollar of business expense reduces your SE tax by about 14 cents. Common deductions include home office, health insurance premiums, retirement contributions, business travel, equipment, and professional development.